Category Archive

I’m heading off for the Austin Game Developers Conference this afternoon.  I’ll be there through Friday evening, if anyone wants to meet up.

I realized recently that I speak mostly in conclusions. That is to say, I am really bad at exposing my thought processes to other folks.  It’s one of the reasons why I blog so infrequently.  I only feel comfortable blogging fully formed thoughts - ones that have relatively well tested hypotheses.  But so much of relationship formation and bonding - the good stuff - happens in the in-between spaces.  I decided I need to actively work on exposing these thought processes.  

So I guess I’ll try posting more casually to my blog. I don’t have a lot of faith in this yet, but I suppose it’s the kind of thing that takes practice.  =)

I had a very enjoyable conversation yesterday with Byron Reeves.  Byron’s the Director of Stanford’s Language and Information Program.  In his spare time, he does a lot of consulting and startup work in the area of virtual worlds and virtual economies.  He told me about some fMRI work he’s done, studying people’s brains while they play World of Warcraft.  And the difference in people’s brain responses depending on whether you tell them the other characters they are interacting with are other people or NPCs (computer AI.) 

One of the companies he’s working with is Seriosity.   They are basically creating a platform to allow companies to create virtual economies by assigning currency values to different types of interaction and communication.  They are coming up with all sorts of very interesting, unique data about how virtual currencies drive behavior and group dynamics. 

Anyways, a few random thoughts have been percolating in my brain:

- What does it do to a [company's] culture if all interaction can be boiled down to some quantitative representation?

- Isn’t a company’s culture really just some expression of a collective utility function?

- And, has anyone done any studies measuring what type of correlation exists between the rate of change of a [group|country's] economic growth and the rate of change of its language? I guess I’m curious if various Chinese dialects are changing more quickly than languages in more static socioeconomic conditions.  I feel this must be true to some extent, but I wonder to what degree.

Dearest Readers,

If you enjoy reading my blog or liked any of the panels and conferences I put together this past year, I would greatly appreciate your vote for my proposed SXSW panels:

Virtual Goods: The Next Big Business Model! 
What’s Wrong With Today’s Major Social Networks?
Human and Property Rights in Virtual Worlds

I haven’t put together who the rest of the panelists are yet - I’m waiting to see if any of these panels get selected, but I guarantee any panels I put together will be interesting, fresh, and relevant.  Why? Because I really hate wasting peoples’ time. And I really enjoy being a catalyst of enlightenment, in whatever small way I can.

SXSW is my favorite conference of the year.  It’s just a really cool mix of product oriented people: creative people who build stuff.  These are the kinds of people I love to spend time with.  Plus, it’s in Austin and Austin is a super fun town. 

Greatest thanks,

s

update:

p.s. To all of you lazy folks who are reading this post but not voting (e.g. most of you), because SXSW uses awesome Ajaxy Web 2.0 technology, it only takes you 1 second to vote.  So you have no excuse. 

Leigh Alexander, who is one of my favorite writers on the subject of virtual worlds, interviewed me about the future of online gaming.

The whole thing is worth a read - it turns out it’s a lot easier to speak casually with someone than to blog (surprise!).  In it, I talk about one of the holy grails of online gaming:

“One of the hallmarks of a successful Web company is — if you look at the track record of the most successful companies that have stayed independent and sustainable, like eBay, Google or Amazon — they have built platforms [which can] foster entrepreneurs. There are ecosystems that spawn innovation from the community members themselves, and Facebook is falling in with that too, with the new platform launch. Few gaming people understand this intuitively — though, Xbox Live Arcade really fosters an entrepreneurial ecosystem, too. That’s something Areae is trying to focus on – how to build an actual ecosystem and a real, [open] web platform for people to [work, build, and extend upon].” 

We just announced our recent Series A investment in Conduit Labs, a Boston based company that’s focused on building a social networking / casual MMO hybrid.  Well, what does that exactly mean? And aren’t there a hundred companies now doing this exact same thing? 

This new space - the intersection of Web 2.0 and online gaming - is a very difficult one to define.  This categorization encompasses companies like Kongregate to Areae to Three Rings - each of whom is vastly different from the others.  To make it even more confusing, Conduit Labs is not really like any of the three companies I just mentioned.  They’re inventing an entirely different interpretation of what it means to sit at this intersection. 

Conduit Labs is building a gaming environment.  That is to say, the primary driver of user interaction is game mechanics.  This gaming environment lives in an immersive, graphically rich world.  But the gameplay Conduit Labs is building isn’t exactly like other online games we’ve all now become familiar with: there’s probably not going to be much kart racing or princess saving or dragon slaying.  We aren’t yet disclosing what the gameplay or graphical metaphor will consist of, because that’s part of the secret sauce. 

Leigh Alexander from Worlds In Motion wrote up a great interview with Nabeel that provides more insight into what Conduit Labs is up to.

Nabeel: “I think probably every other day now over the last couple months, I see a new casual MMO or virtual world startup; it’s been constant…and what I saw was the same kind of dichotomy — two types of startups. There’re hardcore MMO gaming guys trying to make that experience more accessible, sort of like World of Warcraft meets the web. And the other side of the coin is a bunch of web guys who want to build a web site with virtual gifting and more gaming.”

While Hyatt recognizes the value in both of those approaches, he adds, “I think they’re missing the larger point – which is that there is no interaction on the web that is like a social game. I don’t mean a single-player game, which is based on a legacy of, really, only video games; it doesn’t last hundreds of years. There’re actually thousands of years of games that are primarily social activities like dancing, or bowling. And those are about you bonding with your friends, and there’s nothing like that online right now. And I think the web and social networks provide a whole new medium to create something that’s never been seen before.”

Just like the Wii and Guitar Hero reinvented the social gaming metaphor for a broader audience, Conduit Labs is trying to do the same for your web gaming experience.  I’ve also seen innumerable business plans in the last year for startups in the online gaming and virtual world space.  But most of them have been rehashes of things we’ve already seen, building things like “making the MMO even more casual” or “putting casual games into Facebook” or “Club Penguin but with chimpanzees.”  (disclaimer: I actually like chimpanzees quite a bit, probably more than I like penguins.) 

We invested in Conduit Labs because I believe the team there really gets it: there’s an entirely new type of immersive experience waiting to be built.  It has less to do with technology (although we are building on the basic assumptions/principles of the zero-barrier MMO and all that entails), and more to do with social engineering.  This is a great team that has the right blend of experience that includes Web 2.0, hardcore MMOs and the scalability expertise that comes from supporting tens of thousands of concurrent users, and understanding how to design “fun” for a mass market audience that comes from building groundbreaking social games like Guitar Hero. 

Eesh.  I’m really playing catchup on this post.  My apologies.  If you want to be immersed in my life’s trivialities on a somewhat regular basis, you can follow my Twitter stream.  

For the 2 people that read my blog that don’t read Techcrunch (hi Mom, hi Grandma!), here’s a link to the Techcrunch article that I wrote awhile back on Virtual Goods: the Next Big Business Model. 

Also, the videos from the Virtual Goods Summit can be found here.   These are all worth watching, but if you have only 1 hr, I highly recommend that you watch the first one, Virtual Goods Success Stories.  Kira from Neopets, Paul from Habbo Hotel, David from Tencent, and Min from Nexon all disclose fascinating and very proprietary statistics about their businesses. 

I’m just getting back from a brief vacation.  I thought about going somewhere exotic, but I ended up being very, very lazy. I went to San Diego, hung out with old friends at ComicCon, and emptied my brain at the beach.  I read about a dozen books and watched Season 1 and 2 of Battlestar Galactica.  I know that sounds horribly dorky, but alas.  What can one do? 

When I started writing this blog, very few people were talking about the melding of MMOs and Web 2.0.  My goal for the last year was to proliferate this concept widely and to help bring together what I observed to be two very segregated, but highly complementary communities.  This was my motivation behind putting together a Virtual Worlds/Casual MMO panel at the Web 2.0 Expo and for including the panel on “Virtual Items: Mainstream or Not” at the Virtual Goods Summit. 

 Yesterday, BusinessWeek published a special report called “Getting Serious about Gaming.”  Two of my investments are mentioned in this article, one of which is Areae:

“One of the most high-profile efforts in this area is the L.A.-based Areae, founded by industry veteran Raph Koster (former chief creative officer at Sony Online Entertainment (SNE)) in December, 2006. Still in stealth mode, the company is talking very broadly about its plan to reinvent virtual worlds. But the basic idea is to bring down the astronomical development costs of the popular MMOGs by borrowing from the equally popular and vastly more economical Web 2.0 technologies supporting sites such as MySpace and YouTube.”

Hrm, they don’t exactly get it right.  What they do get right is that Areae is still very stealthy. In all seriousness, I don’t like invoking a Web 2.0 metaphor where the sole conclusion is ”cost reduction.”  Web 2.0, while an accelerant of more cost efficient development models, is in my mind, primarily characterized by a collaborative and community-driven relationship with your users where “A+B” does not merely equal “A+B.”  This is the kind of alchemy all of us technologists strive for - how do we transform mundane, commodity database driven web pages into something that supports life?  ;>

And since when was MySpace Web 2.0?  

In any case, all my good natured snark aside, I’m very happy to see the transformation in the market that has taken place over the last year.  The conversation around next generation social media has moved far beyond Second Life and WoW.  Every day, I see new business plans and prototypes of entrepreneurs constantly innovating in this space. 

I am producing this awesome conference, the Virtual Goods Summit, with my friend Charles Hudson.   We wanted to put together a conference that moved the dialogue beyond “Virtual Worlds: Hype or Not” to discussions that can inform meaningful industry evolution and actual implementation.  With companies like Tencent ($500M+ yearly revenue) and Habbo Hotel ($65M yearly revenue) generating a significant portion of their revenue from virtual goods, it’s clear that virtual goods represent a real, viable business model and will likely have a huge impact across all of the consumer Internet.  [update: Note that this isn't just for people interested in gaming.  There's a reason we only have one session related explicitly to virtual goods in gaming & entertainment!]

What: Virtual Goods Summit 2007
When: June 22, 2007 from 10 AM - 5 PM
Where: Annenberg Auditorium Stanford University

Virtual goods and virtual currencies are growing beyond their traditional
roots in online gaming and beginning to exert growing influence on the
development of social networks, community sites, and casual games. This
growing influence is due in large part to the fact that consumers have shown
a willingness to embrace virtual goods as a way to express themselves
online. From pets to coins to avatars, virtual goods are becoming a real
opportunity for companies who are looking to build more engaging online
experiences:

• Neopets users have created over 206 million virtual pets
• Tencent has over 250 million active users in China and generated $100+ million in Q1 2007, 65% of their revenue comes from virtual goods and services
• Nexon generated $230 million in 2005, 85% of which came from virtual item sales
• Habbo Hotel has over 75 million registered avatars in 29 countries, 90% of their $60 million+ yearly revenue comes from virtual goods
• Gaia Online does over 50,000 person to person auctions a day - making them the 3rd largest auction site on the Internet.  Their average user consumes 1200 page views a month.        

The Virtual Goods Summit will bring together leading entrepreneurs, venture capitalists, and technologists to discuss the present and future of this rapidly growing market. We encourage you to join us at this year’s event and participate in what promises to be an exciting and lively conversation around some of the key questions facing the virtual goods market today:

• How will virtual goods and virtual currencies impact social networking?
• Are virtual goods the next big business model?
• What does it take to successfully launch a virtual goods offering?
• Are virtual goods poised to go mainstream?
• What does it take to nurture and develop a successful virtual economy?
• Why are users embracing virtual goods?   

We’ve assembled a strong team of industry experts to join us for the day and share their views and experiences:

• David Wallerstein, Tencent/QQ
• Paul Thind, Habbo Hotel
• Kyra Reppen, MTV Networks (Neopets)
• Craig Sherman, Gaia Online
• John Chi, Nexon USA
• Amy Jo Kim, ShuffleBrain
• John Vars, Dogster
• James Hong, HotOrNot
• Jia Shen, RockYou
• Erik Bethke, Go Pets
• Tim Stevens, Doppelganger
• Raph Koster, Areae
• Mark Wallace, 3PointD
• Dan Kelly, Sparter
• Daniel James, 3 Rings
• Sean Ryan, Meez
• Jim Greer, Kongregate
• Joshua Hong, K2 Networks
• Robert Scoble 
• Susan Wu, Charles River Ventures 
• Kevin Efrusy, Accel Partners
• Nabeel Hyatt, Conduit Labs

I highly encourage you to register. I think it will be a fabulous event full of lively discussions and great people.  We’re in the process of setting up an IRC backchannel, a Twitter stream, and other communications channels, so keep posted.

Sincerely, your friendly conference hosts and organizers,

Charles Hudson and Susan Wu

I’ll be moderating a panel from 3:50 - 5:00 pm at the Digital Hollywood conference in Santa Monica.  My panel is called “Micropayments & MicroEconomies - Establishing a New E-Commerce Gateway to the Future”.  I didn’t name it.  Had I named it, it would simply be called “Microtransactions and Virtual Goods, the next big business model”.  You know, something catchy and simple.

 The speakers on my panel are

• David Wallersten, Executive Senior VP of International for Tencent  [China's largest portal with 236 million active users.  65% of their revenue comes from microtransactions and virtual goods/services sales.]
• Craig Sherman, CEO of Gaia Online.  [Craig is a super interesting guy and would be great on a panel on just about any topic.  At a billion posts total and 1 million new posts a day to its forums, when might Gaia overtake Yahoo! Groups in usage?]
• Susan Choe, CEO of Outspark.  Outspark is a casual MMO company that is taking already successful Asian games, primarily from Korea, and porting them to the Western market.  They plan on releasing a handful of games this year, so it will be interesting to see if their portfolio approach to aggregating titles pays off.  Susan’s background in overseeing part of the development of CSFB’s online retail brokerage system has given her a unique perspective as to why it’s so challenging to create a clearing house and exchange for microtransactions across multiple sites/properties.  Someone’s gotta be the bank, and it’s probably not going to be your average casual MMO company.
• James Hong, Co-Founder of HotorNot.  James recently walked away from $500K a month in primarily subscription revenue to reinvent HotorNot as a free service.  It’s a big gamble - cannibalizing your existing revenue base and experimenting on new business models. 

If you’re at Digital Hollywood, come by and say hello to us. 

If you’re at Web 2.0 Expo, come to my talk tomorrow, Wednesday from 3:20 - 4:10 pm in room 2009, about “the Future of Online Gaming & Virtual Worlds.”   I’ve put together a wonderful group of panelists that includes:

• Gene Yoon, VP Business Affairs for LindenLab / SecondLife
• Craig Sherman, CEO of Gaia Online
• Lane Merrifield, CEO of Club Penguin
• Raph Koster, President of Areae
• Joi Ito, Chairman of Creative Commons, Board member of Mozilla, and my World of Warcraft guild leader

I’m psyched because Gaia Online and Club Penguin are both talking publicly for the first time ever about their businesses.  These are two of the most exciting web companies you’ve probably never heard of, unless you have kids between the ages of 6-15.  

I’m taking question suggestions!  Post your comments.

We’ll be talking about why “online gaming and virtual worlds” is incredibly important to the future of the Web as a whole.  And maybe delving into SecondLife’s furry monetization strategy.

Umair Haque writes a blog called BubbleGeneration that I like a lot.  His writing has consistently helped me expand my thinking in many ways.  He recently commented on my post about why avatars are the web’s most undervalued asset today:

“Controlling the emotional intensity of an industry is an incredibly powerful source of advantage in the post-network economy.

But that’s a small part of the reason avatars are valuable.

The truth is that the post-network economy is an interaction economy. The avatar is a focal point for interaction - a sticky, context independent, information-rich focial point…which should be enough to explain why they can also be explosive focal points for value creation.”

I think we are actually making the same point, we’re just using different words to describe it. 

Whenever I evaluate a new consumer startup, what I am constantly ruminating is “What is the relationship between this service and the user who uses it? Is it a weak emotional relationship or a strong emotional relationship?  What is the nature of this relationship - is borne of need or desire?” and so on. 

I care about this because emotional intensity has a direct correlation with 1) how much attention a user is willing to spend on any given product/topic (Quantity) and 2) the Quality of the interaction the user is likely to have with this service.  Emotional intensity creates option value for the service provider. 

Think about your most recent romantic relationship.  The stronger you feel about someone, the more likely it is that you are going to 1) spend more time with that person and 2) explore the depths of the relationship’s possibilities.

As we are moving into an era where attention is the most valuable currency and the user is pummelled with more content they could possibly consume in a lifetime, the strength of one’s emotional connection with a service, a brand, or a product is of utmost importance.  The dominant strategy for creating defensible unfair advantage around your product in Web 2.0 was community and the associated network effects.  But in a world where every single service has deployed a community platform with identical feature sets, how do you differentiate? It’s not enough to deploy communication platforms, user profiles, and voting tools.  Social game mechanics help, because they lay the foundation for a number of different emotion states: tension, exhilaration, accomplishment, delight, etc.  

As product designer, your role is similar to that of a conductor of a large symphony.  Only, your instruments are peoples’ emotion states.  Each user experience is the orchestration of numerous emotion states.  The value of a customer to you is completely correlated with his/her set of emotional reactions.  To add complexity, the timber of each note varies by instrument and by person.  For example, the emotional footprint of surprise is different than that of longing.  Surprise has a big high and tapers off, leaving it with a short tail.  Some people may be frustrated by a feeling of longing, whereas some people may find it stimulating.  Ad infinium.

In short, this matters because emotional intensity is the most important filter by which people determine how to spend their time and energy.  If you understand what the emotional relationship with your user feels like, you can then figure out what the possible range of monetization opportunities might be. 

Folks like Wagner James Au and Mitch Wagner of InformationWeek have already blogged about the panel, but I wanted to share my presentation with the folks that couldn’t make it.  This is my take only.  The other panelists - Wagner James Au, Robert Scoble, and Robin Hunicke all had great things to say.  By the way, Robin is brilliant.  She’s the lead designer for the forthcoming MySims on the Nintendo Wii and a PhD candidate in CS/AI at Northwestern.  As she spoke, I thought ”Sheesh, it’s going to be hard to follow her.”

The question I was trying to answer was, “Is the next generation of the consumer web 3D?”  I think the answer is not necessarily.  

1. The reason why we’re asking this question is because there’s a bubble forming in the virtual world space right now.  

That’s a pretty incendiary statement. What do I mean by it?  What I see on the horizon are dozens and dozens of new virtual world platforms and titles hitting the market - far more than the public will want to consume.   By ‘title,’ I mean a self contained, branded version of a virtual world much like “Virtual Laguna Beach.”  All the big media and consumer goods companies are looking at what’s happening with online community sites like MySpace and Facebook and want in on this action desperately.  

However, I think that all of the media hype around Second Life is misleading the public about what the next generation consumer Internet might look like.   That isn’t to say that Second Life doesn’t have tremendous merit in moving the dialogue forward about what collaborative work and play spaces feel like.  What I mean is that there are now quite a few companies who equate “future of online communities” with “3D graphical world.”  The mad rush by these big brands to create empty showrooms in SecondLife is proof of this.   Just like in the dot-Bust days, there will be lots of shoddy substandard products brought to market in the mad frenzy to create a ‘presence.’ 

But the good news is that in this crazy landgrab, there will be a couple of winners that shine through.   There is considerable appetite for online play spaces right now - you can see the proof of this in the many bootstrapped and under the radar services that are getting a lot of traction. 

2.  What does the next generation consumer Internet look like?

What I’m interested in above all else is the nature and evolution of people and our constructs [culture, economic and belief systems.]  As I’ve said before, I think the real story behind the consumer web today is what’s going on cognitively - how our relationship with the Internet is changing. 

Here’s how I see the evolutionary arc of the online user experience:

Web 1.0: Information Sharing
Web 2.0: Interaction
Web 3.0: Immersion

By immersion, I mean that people will demand experiences that are more emotional, engaging and genuine.  3D graphics are one way to create immersiveness, but not the only tool we have in our toolkit.

Let’s look at how the ways people have expressed themselves online have changed over time:

Pre-Web: Text based worlds
(I am looking at a character named Ulion and the text he has used to describe himself)

Web 1.0: Geocities

Web 2.0: MySpace, currently the world’s largest massively multiplayer online game

Then, there are a few sites that reveal glimpses of what the future might look like.

Web 2.1: Gaia Online
(Gaia started as a bulletin board system that has slowly layered in a 2D virtual world graphical metaphor over time. What you’re looking at is one user’s profile.)

Web 2.1: Yelp

Web 2.1: Flixster

3. What are the implications?

We are moving from web pages to web places.  More and more game-like features will find their way into everyday web design - you see this already being implemented successfully on sites like Yelp and Flixster.  People will seek out experiences, rather than just content.  3D is just one tool out of the many we have available to create immersive, engaging experiences.  3D should be used tactically - it makes sense for some audiences and for some applications.  There are many ways to think about presence and dimensionality online.  3D graphics facilitate spatial/physical awareness. But we should also be thinking about 3 dimensional social presence and shared/collaborative presence.  Luckily, there are a couple of good examples in this space already.

This post will be continued…

I think the future of online gaming eventually converges with the future of Web 2.0.  This session will explore what we think the future of online games looks like. On the panel with me are Raph, Craig Sherman - CEO of Gaia Interactive, Gene Yoon - VP International of Linden Lab, and Joi Ito - my guild leader and Creative Commons guru!

 Early bird registration ends today, so if you want to go, sign up and receive a discount.

save $300 by using the discount code below to register (by today)

earlybird = $200 off, + $100 off with discount code webex07mk35

register at www.web2expo.com/pub/w/53/register.html

Also if you have any thoughts or ideas about the type of content we should cover, I welcome your suggestions. 

 

Today I was on a panel about avatars with some very fascinating folks, each of whom has followed a very nonlinear path through life. For example, I learned that Mark Stephen Meadows hitchhiked from Kuwait to Baghdad a few years ago, wanting to experience first hand what the mass media filters might not reveal to us. Ben Cerveny escaped from a Beverly Hills childhood and now lives half time in Amsterdam. Justin Hall showed me this totally kick ass passively multiplayer “game” he’s built - it is implemented as a Firefox plugin that tracks and turns your normal clickstream into something engaging and interactive.

Here are my notes from what I said (and wanted to say but didn’t get to). Caveat: it’s very one sided and only reflects my perspective.

 

1. Identity is at the heart of everything:

 

How technology is transforming people’s understanding of themselves is the basic assumption and premise that I have that everything else hinges on. Essentially, the cognitive dissonance between people’s online and offline selves is dissipating. Meaning, all the stuff we do online is very real. The very term ’second life’ is a misnomer. There are so many panels here at SXSW about avatars and virtual worlds. I find the treatment of these topics to be a bit backwards - concepts like avatars and virtual worlds are symptoms of the larger underlying trend. I’m not sure that people are asking the right questions. Let’s start with the basics - “What happens in an online environment when there are absolutely NO cognitive barriers between our online and offline selves?” “Why does an avatar matter at all?” “What types of relationships do people have with each other online and how can an avatar make that more or less meaningful?”

 

2. We already all have avatars, we just don’t see them:

 

So I think that the mainstream audience finds the topic of avatars to be a bit esoteric. It seems foreign to them, either something kids and teenagers ‘play’ with, or something that ’strange people that inhabit SecondLife gravitate towards’. But the truth is that everyone who uses any web site today already has an avatar - we just aren’t using the graphical metaphor of a virtual character to represent them. We don’t notice them today, because we participate in the web largely through 1st person camera view with a fixed perspective. We shouldn’t assume that avatars are the best possible way to solve a product design problem - namely, personalization, customization, and enhancing the immersiveness of an experience. Sometimes they are. There are a few different ways to think about presence online - there’s the spatial-physical 3D approach, but there are also ways to create more dimensionality around social and shared social presence.

 

3. Why Camera Angles are Important in Immersive Environments:

 

The position and design of a camera view is the metaphor we use to filter our moment by moment experience. We have very little concept of ‘camera’ manipulation in our web environments today. But camera design is actually quite an important component in thinking about player immersion. There’s a huge amount of prior learning in the game design space pertaining to the use of cameras and how it correlates with good user experiences. Some of the best games give liberal camera control to the user - because camera angles should be situational, and because it allows players more control over the context of their engagement.

 

Cameras are important because not only do they define our physical relationship with the world around us, but they also determine how a story is told and sets the framework for your relationship with the characters are around you. In the future, good web product designers will need to understand camera placement and its emotional effect on users.

 

4. Avatars are the most undervalued asset on the web today:

 

As I mentioned before, I think most folks generally regard avatars as being fairly disposable today. I think this attitude will change. From an investment perspective, I am actively looking for interesting projects in this space. For any web property/community, the avatar is the single most valuable piece of real estate. It’s the focal point of greatest emotional connectivity with the user, across all environments and pervasive across all my interactions. We talked on the panel about why being able to fragment your personality into various channels of expression is important - I think that the model for avatars in the future involves one descriptive container that contains many functional subcontainers. And each of these functional subcontainers includes an avatar or some expression of your personality that is most relevant to whatever environment you choose to express it to. Very similar to what’s being proposed with OpenID today.

 

5. Big learning from past experiences that is relevant to my VC work: Timing is everything

 

Being able to understand where consumers are today and what they are capable of absorbing is very important to creating successful products. Understanding the user behavior / learning curve is incredibly important. We might academically know all the “best” answers, but having the “best designed” product isn’t nearly the sole factor in determining user uptake. We are now making the leap from web page to web place. I am much more likely to invest in an avatar company/product that is fun and cartoony than one that is photorealistic, given the current state of where consumer sentiment is.

 

6. Current observations of what consumers are responding to in the market:

 

Mybloglog/Trakzor are early broad successes in shaping 3D social presence. I like MyBlogLog a lot as it facilitates passive, serendipitous discovery - something sorely needed in my daily web experience. These two services mark the first of many steps that brings the idea of avatars and alternate camera views to a more mainstream audience. These services also facilitate “together aloneness” - an incredibly important design principle that all web/game designers should incorporate into their product design.

 

7. Why avatars are important:

 

There are going to be a bazillion virtual worlds coming online in the next several years. Every major media company is going to try to port all of their brands into some sort of virtual 3D environment. These may be poorly designed, inferior products, but they are going to have the very real, very important impact of training the consumer to think about virtual worlds in a certain way. As product designers, we can help inform these big media brands who want to foray into virtual worlds.

 

Avatar design and avatar mechanics have huge implications for the types of relationships that are possible online and huge implications for future product design. I certainly don’t even begin to pretend to know any of the answers. I would point to game designers who have been iterating on these problems for years. Also - I haven’t yet spoken about the role of NPCs (non player characters) in online virtual world environments. How we think about NPCs also has a lot of impact into our future world design. NPCs can help us reframe the web product design question into one of ‘interactive narration and storytelling’ rather than ‘product utility.’ It’s an awesome time to be a product designer! There’s so much to create.

 

8. A couple of insightful academic studies:

 

There was a fantastic session at GDC (game developer conference) that Raph blogged about - the 10 most interesting academic studies on games/players/game design of the last year. This is must read stuff - it’s super insightful. The download to the presentation is available here at Jane McGonigal’s site. One of these studies particularly pertained to the panel discussion -

 

Thaddeus Griebel’s study revealed that there is strong correlation between player race and game character choice, but a weak correlation between player personality and in-game behavior. Females are also much more likely to make their Sims have babies than males.

 

Takeaway: players are a little likely to want to enact their personalities, but very likely to want to enact their race

or gender.

 

Nick Yee also has a number of studies that relate to avatars and user behavior. Btw, Nick does fabulous ethnographic research in Second Life. His most recent study investigated how our choice of avatars impact our behavior (paper download here.) His study revealed that the two are inseparable: people assigned more attractive avatars were more intimate in self disclosure and interpersonal distance than those assigned less attractive avatars. Also, people assigned taller avatars behaved more confidently in a negotiation task than those assigned shorter avatars.

 

A caveat, as with all academic studies, that nothing is fact until plenty of people have tried assiduously to disprove these theories.

In a previous post, I talked about how I respected Second Life but felt that it was probably unsustainable, primarily due to the fact that the system isn’t more open. Virtual worlds and social networks generally thrive with permeable boundaries, not rigid ones.  Well a few months later, Linden Lab has announced that it is open sourcing the Second Life client under the GNU GPL license.

While open sourcing the client doesn’t necessarily result in an open platform or openness of user experience, it does at least allow for an environment in which 3rd party designers and developers can create the tools that might bring about a more open user experience.   Openness is a design philosophy, whereas open source is a licensing choice. 

So while Second Life still has a ways to go on the openness front, IMO, it is a pretty bold first step and opens the system to a lot of exciting new prospects.   I join Raph Koster amongst many others in congratulating them for making this step.

Of course, Second Life isn’t the first virtual world to become open source.  The history of the virtual world is intricately linked to open source back to the early MUD/MOO days.  Various projects like World Forge and the more recent Open Croquet have already been down this path, though neither of these projects has had the number of ‘residents’ nor the vibrant economy of Second Life.

One of the primary benefits of open source is that it can make the platform much more accessible to many new audiences - e.g. open source creates economies of scale around innovation and distribution. This is at the heart of the long tail argument: open source allows each participant in the ecosystem to do their own marginal benefit/marginal cost calculation to determine whether or not it’s worthwhile to modify the code for their own (possibly narrow) needs.  In contrast, in a proprietary system, the code maintainer does one single marginal cost calculation that generalizes the needs of many. 

In the case of Second Life, the viewer application was already available for all the major OSes, including Mac OS X, Linux, & Windows, so basic OS platform support isn’t much of an issue, but the open sourcing will still likely result in many beneficial developments, including:

• Reducing the engineering/QA costs at Linden Lab. As one of the better implementations of a Snow Crash like Metaverse, Second Life has attracted more creator personality types than traditional online games or communities. libsecondlife, a library/SDK that implements a subset of the Second Life network protocol, is a pretty good indication of how motivated these hacker/coder types will be to extend the utility of the Second Life client beyond what it can currently do. A fully open sourced client extends the possibilities both by being a more powerful framework into which new functionality can be added and simply because it is a fully official project, supported directly by Linden Lab.
• Mashup style applications, widgets for MySpace.  libsecondlife was somewhat limited, in that it was built on a partial reverse engineering of the SL protocol,  whereas the full viewer release reveals the complete details of the protocol. I expect to see things like web page to Second Life widgets allowing Second Life users to check their in-world messages or chat with people who are in-world without actually loading the full viewer application locally.  I also expect to see scaled down Second Life clients that can run on cell phones or other small devices, giving the user a simplified 2D experience of the Second Life world as an alternative for when they can’t run the full desktop client. I don’t expect these clients to support the full immersive Second Life environment like the official desktop client, but lightweight in-browser access would be a net positive for a lot of Second Life members.
• Improved graphics. For all the network engineering marvels Second Life possesses, its graphical engine is decidedly old school by today’s standards. There are a lot of ways in which it could be improved while still displaying the same content. I expect some bored graphics developers to take the core client and move it over to a more shader-friendly rendering model, perhaps adding in some clever automatic up-ressing of texture and 3D model content in the process, a la Tenebrae Quake.
• Better support for third-party building tools. With the full client open sourced, I’d be surprised if the 3D model builders who live, eat and breath Maya or 3D Studio Max or Blender don’t build tools to allow them to more directly interface their 3D modelling tool of choice into the Second Life world viewer.
• Accessibility by new audiences. For what I assume are the purposes of ease of cross-platform development, Second Life uses a custom UI widget system. Between this and the inherent blind-accessibility problem of untagged 3D data, Second Life just hasn’t been very accessible to the disabled. While there is no guarantee that this an itch some third-party developers will want to scratch, it would be a really nice benefit if it did come to pass. A virtual world like Second Life is exactly the sort of thing that could be liberating for a lot of disabled folks, yet the current system doesn’t cater to them at all. Hopefully motivated open source developers will fill the gap here.

The open sourcing of the Second Life viewer is a big leap forward and as with any big change, there will be some short term growing pains and fears. Wagner James Au highlights three such issues in a recent post on GigaGamez. While his concerns are valid, I don’t think any of the three issues he cites will be long term problems for an open source Second Life. His three major points include:

• Revenge of CopyBot - The whole CopyBot issue seems to have been overblown in retrospect. As I mentioned in a previous blog post, CopyBot itself was no great revelation for the technically savvy. Even before it existed, there were plenty of OpenGL and DirectX mesh capture utilities for graphical engine debugging that could have been used in secret for the same purpose. Ultimately, there is nothing Linden Lab can do technically to stop geometry/texture capture. This is something that has to be handled as a social/terms of service violation, which is what they have been doing since the original rise of CopyBot.
• Dying Netscape’s Noble Death? - I’m not sure the Netscape analogy is a good one at all, considering that for now Linden still controls the server and thus the network protocols that are the “keys to the kingdom”. But even if the Netscape analogy holds, Wagner notes that Netscape currently has less than 1% of the current web browser market, which is somewhat misleading as it ignores the pedigree and/or the success of Firefox.
• Building Babel? - Again, as long as Linden controls the servers and thus the network protocols, I don’t think any Babel will result. It will be extremely interesting to see how Linden Lab goes about open sourcing the server side of Second Life (which they have said they will do) without some sort of world splitting and some amount of Babel as envisioned by James, but for just this client release, I don’t really see that happening.

Of course, none of this is exactly world changing, and it still remains to be seen how Linden Lab handles the open sourcing of the server, which is potentially a much bigger deal.  But this is a great first step and I’m glad to see them moving along this path, both as someone who uses Second Life and as someone who is passionate about virtual worlds in general.

 UPDATE:
Other good posts from Ethan Zuckerman (”The core objection I raised…a few weeks back is the fact that Second Life, at present, is a monopoly.”) and Stephen O’Grady (”Linden’s probably only a few years away from an Innovator’s Dilemma in terms of combatting open alternatives”) and Cory Doctorow (”an enormous stride towards turning Second Life residents into real citizens instead of mere customers. “)

Raph Koster announces his new company, Areae - and we at Charles River Ventures are very excited to be part of this journey.   I’ve known Raph since 1994 or so - back when we were MUD developers, and I’m excited to support him in finally realizing the dream he’s had since starting Legend MUD. 

Though Areae is still very stealthy, Areae sits at the intersection between Web 2.0 and MMOGs.  If you think about it, the Web 2.0 and the Massively Multiplayer Online Gaming communities have largely been pretty siloed - gamer developers go to game industry conferences and Web 2.0 folks go to Web 2.0 conferences, and there has not been enough intermingling between the two communities. 

But both industries have been inching closer and closer together.  I predict that the successful online communities in the future will continue to more strongly resemble MMOGs.  And MMOGs will continue to extend their reach and exposing their data to other Web applications - either formally, by the developers/publishers themselves, or informally by folks like Rupture. 

Here’s what the 2 communities can learn from each other: Game designers have been creating rich, fully immersive environments for years.   All of the design principles that I thought about when I was designing MUDs are identical to the issues facing Web designers today - how do I create more immersive environments? How do I give participants -equity- in this virtual world? How do I make users feel like real citizens in my social ecosystem? How do I create better scale around world and object creation? How can I expose building tools that were previously available only to Admins and Devs to the end users - and make them dead simple to use?   How much content should I pre-seed and what content containers do I think users are going to be more likely to want to customize and make their own? 

For Web 2.0 designers, there is a brilliant, must-read presentation that Amy Jo Kim put together about how to intelligently apply game design principles to Web 2.0 services to make them richer, more compelling, and more immersive (read: “sticky.”)

Yet, the Web 2.0 crowd knows a lot that the game devs don’t: how to create massively scalable, low barrier to entry, micro-chunked experiences.  How to create appealing, mass market products that are appealing to a diverse demographic.  How to iterate quickly and create production processes that give you tremendous economies of scale around innovation. 

I’m excited by the possibilities - Raph has brought on an excellent team and advisory board.  It’s time the Web 2.0 and Gaming communities begin collaborating for the betterment of all users, everywhere. 

Here’s some of the coverage on Areae thus far:

GameBiz Daily:

“I would describe what we’re trying to do as marrying together a lot of the philosophy of the web and web 2.0 with virtual worlds,” Koster told GameDaily BIZ. “We’ve been paying a lot of attention to how the Internet is going. If you remember my speech at the Austin Game Conference last year about whether or not the games business is full of giant dinosaurs… a lot of that ties into this.”

CNet:

Koster is not divulging much about Areae, but the company’s site alludes to its pure, massively-multiplayer online game DNA: “We’re working on some new tech that will literally change how virtual worlds are made. We’ve got a cool world or two incubating on the back burner.”

Gamasutra:

With what sounds like a firm emphasis on user participation, as well as user customization and content, all central tenants of the Web 2.0 ethos, we make an obvious leap toward the current open virtual world leader, Second Life, which Koster laughingly dismisses. “See, you’re already jumping to conclusions about what we’re making! Honestly, there are as many differences from Second Life as there are from Everquest.” He pauses, but concludes, “I’ll just have to leave you tantalized.”

Second Life is interesting to me - I truly respect the service, but I don’t love it.  That is, I have a lot of intellectual respect for the way they’ve run their business - they’ve been bold, innovative, and relentlessly experimental.  But the service doesn’t grab me emotionally.   I also think that their high technical barriers to participation and the fact that SL is a closed standards system ultimately deters them from reaching mass market adoption.  Yes, they get a lot of publicity and their logins are growing at a fast clip - but I suspect there is a significant amount of churn. I spend a lot of time in the area of virtual worlds - because I think we’re just at the tip of the iceberg here.   

One day, there will be an open standards based platform that makes virtual asset/world creation as easy as choosing templates and widgets for your MySpace page.  In fact, today’s social networking services like MySpace and Flickr already incorporate some smart game design principles, such as levelling up, collecting virtual objects, and homesteading in the form of customization. I expect that virtual items will one day become a far more legitimate asset class and that there will be much improved liquidity for these assets in the future.  It sounds absurd, but there are some basic economic reasons why this concept of real money trade (RMT) makes sense, despite all of the negativity that RMT receives from the core gaming community:
1) Virtual goods can confer real economic utility,
2) It can be much cheaper to buy virtual goods than procuring them via more traditional methods - such as actually spending the requisite time necessary in-game or in-world,
3) Virtual goods can generate attractive investment returns.The folks who are already making their living in Second Life know this and they are the pioneers for what is to come. What the Electric Sheep Company and Edelman PR is doing with this business plan competition is exciting and I’m happy to be a small part of it.   For the record, CRV is not investing in any of these virtual Second Life businesses - I’m merely a judge.    I’m interested to see how these real entrepreneurs adapt to problems that aren’t idiosyncratic to virtual worlds (the stability of the currency) and ones that are idiosyncratic (how the recent CopyBot problem may mean that only services centric businesses can thrive in Second Life.)   Also for the record, I don’t believe that the current patterns of real estate values in virtual worlds will hold - for reasons that I’ll get into in a later post.

So…very timely to our launch tomorrow of the Second Life Business Plan contest is the Copybot scandal that’s threatening to undermine the entire SL virtual economy.   

CopyBot captures the data being streamed to a local SL client and allows the user to clone that data in a way that creates an identical copy. Furthermore, this copy is not linked to the original in any meaningful way on the server-side and thus can’t be identified as a direct copy.  Needless to say, this disrupts SL’s entire economy because it’s now easy to create millions of perfect knock-offs of the virtual Hermes boots it took me 15 craftsmen and 2 months to painstakingly build. 

(Not Hermes Boots by Sol Columbia available for sale at the SL Boutique)

My friend Raph Koster wrote an awesome post yesterday analogizing the situation to the heated debates about DRM in the music and video markets: DRM is good when it works to protect your economic interests, evil when it prevents us from enjoying the data we want.  Raph says, “CopyBot is a mirror, and what we see reflected in it is the unsavory fact that we all want DRM, if it favors us.” 

A lot of controversy has erupted within the SL community over what to do about this issue, with many content creators vocally attacking SL’s developer, Linden Lab, for allowing the situation to occur.  Interestingly, CopyBot grew out of an open source library that was developed by third-party OSS developers but is unofficially endorsed and supported by Linden Labs.  Once CopyBot fell into the hands of end users for the purposes what amounts to basically SL piracy, the libsecondlife developers removed the CopyBot source code from their servers at the request of Linden Labs.  But of course, once something like this has been unleashed, it is essentially impossible to contain it.  In fact the press surrounding the scandal only amplifies the tool’s popularity amongst the folks who are most likely to abuse it.

 

The interesting question that arises is how do you close Pandora’s box?  What can Linden Labs do now?

The simple answer in most cases is that you can’t close Pandora’s box, at least not completely.  Linden Labs has begun to take a hardline stance on this issue by threatening people caught using the CopyBot with world banning, based on Terms of Services violations.  I suspect they will also go down the obfuscation road in future patches of the SL software.

Data and code obfuscation is something that software developers have been dealing with for a while now.  As computer languages (such as Java and C#) emerged with rich metadata that allowed developers to use programming concepts such as reflection, the amount of descriptive data in the executable that runs the program has grown to the point where it is often trivial for a decompiler to reverse engineer the program back into usable source code.

There is no real bullet-proof way to avoid this situation without losing all the benefits that the meta-data provides and so the primary way of dealing with the issue is to obfuscate the code before shipping it out to users.  Basically, this involves running an executable which reads your executable, and using many of the same meta-data constructs that allow for de-compilation, it does a lot of renaming of identifiers, so that every method or public variable in your program will be named a, aa, aaa, aaaa, etc. instead of the real names that are in the original source code.  The end result is an executable that can still be decompiled, but when decompiled is so confusing to a human reader that it is pretty much useless.

This exact type of obfuscation isn’t directly applicable to 3D data as used in Second Life but I can easily see Linden Labs employing the same basic strategy of complicating the 3D mesh format they used for the sake of being harder to reverse engineer.  This doesn’t stop things like CopyBot from being written (in fact, there are already graphical capture software programs that work at the OpenGL or DirectX driver layer that could have done what CopyBot is doing a long time ago) but it does make them a lot more difficult.  And in the end pretty much the best you can hope for when it comes to digital data duplication is to make it so difficult to do that it is just much easier for the user to acquire it legally than it is to steal a copy.  Which gets us back to the DRM debate. 

And with regards to the Second Life business plan contest - I’m interested to see whether or not it dampens the entrepreneurial spirit within SL or whether new folks will see all of the fear and concern as an opportunity from which to build new businesses.